Mario Gabelli, GAMCO Investors CEO & CIO, offers insight on finding value in the stock market.
welcome back, everybody. we are live in omaha this morning at the centurylink center where is where warren buffett and charlie munger will take the stage tomorrow to address the berkshire hathaway meeting. all the shareholders here, among 35,000. mario gabelli joins us right here on stage. mario, it’s great to see you this morning. and we’ll watch warren. you’ve been a berkshire shareholder for how long? i first meat warren back in the early 70s when he was at pinkerto i went to columbia business school as warren did so he, you know, had been great success, roger murray and tonight we’ll have tyler santos, who is also on cue to help continue the philosophy of value investing. this is a mecca for value investing. it is. there’s no question it’s a very important fundamental but it goes back to the core competencies. on the other side of the coin, warren always argues if it wasn’t for ben graham, he would have been successful but not as successful. what we’d like to do is have warren and the gates foundation back to the columbia business school and, you know, a billion dollars is not a lot. a billion dollars. why not. why don’t you talk about your connection with columbia — i’ve been on the board for 25 years. the mayor and glen hubbard have been very helpful in continuing that tradition. when you look at value investing and you look at who’s investing in the stock market today, do you think value investing is as strong? is it stronger, weaker than it used to be? becky, 40, 50 years ago, you’d come in and tape and you’d watch the tape, the traders would look at stocks. but commissions were fixed until may of 1975. fast forward, we have ets, bundled products, you’re taking stocks, treating them like commodities, beans, corn, up the limit, down the limit, making it easier for organizations that want to do flash trading, co-locate computers closer. we’re investing. we’re buying businesses. you’re talking about ipos. how do you create the linkage between venture capital, capital fromle old hewlett packard, money in the garage to creating some really interesting new opportunities. that’s the linkage. that’s why we’re investors. we want to buy a business, look at the intrinsic value and how do we make money? when you look at the market overall, do you think this market is cheap or expensive at this point? i kind of have to have a comment on that and i look at the cash flow. how is a company going to grow, company completing globally, what’s happening to companies around the world, what are its earnings, where are they coming from. you need two elements, one is in interest rates, which in theory is over time through inflation, which is not thee now because they’re being rigged and the second is confidence. so when i look at the elements that are in place that could continue to keep market valuations higher, those are the elements that i would think are positive. so at this point positive meaning stocks are undervalued? if you assume a ten-year 5% and underlying inflation higher than it is, nominal earnings rise and indicate stocks are not expensive here. overall you like the market. i’m not biography the market. a cincinnati stock closes down. we like financial engineering. another company announced a deal this morning in the global satellite business. we have a conference coming up on new orleans, talking about spectrum. they’re going to announce results. how do we compete globally? how do we give you and i as consumers speed, mokt. how do i watch cnbc anywhere, any time, anyplace? and there’s a juggernaut and it’s called spectra availability. the broadcasters have it. how do we reallocate it, how do they get paid? you’re always thinking. andrew has a question for up. i have a really quick question, mario. it’s a dark subject — only one? it’s one question but it’s dark, pretty dark. it’s something that was said about warren buffett recently, talking about what would happen about warren buffett, after his death. he says i wanted you respond. he said a far greater risk to shareholders is that buffett begins to lose it mentally and make bad decisions and the board won’t take away the key. do you think the board will be able to identify if there’s a moment warren can’t be the ceo of the company? andrew — i said it’s a dark question. in the morning and finish at 00 and you’re getting on a flight. warren tomorrow is going to be here — it’s unbelievable. i’m with you but i’m curious of the larger issue. you’re raising a hypothesis that you want me to address and i don’t agree with the fundamental hypothesis. notwithstanding that, let’s look at facts. the stock is 123,000 a share 1.7 billion shares. what’s the value, what’s the ebidta, why can’t you assume someone would come to the table and split it up? each plays bridge, think dimensional. our minds will go before warren’s, andrew. good luck! nanding that, it’s not a hypothesis we need to address today. stay tuned. we’ll being back over the next five years. it’s not my view and it’s dark. it’s not your view but you’re articulating it. come up with a better one. he hasn’t gone elephant hunting. mario, i will see you. andrew, it’s a great question, it’s not dark, it’s appropriate.